M/s Savyasachi Constructions Private Limited, Hyderabad V. ITO,Ward 3(1), Hyderabad

ITA 504/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98506 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 28-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2014
• Court: TRIBUNAL
• Department Lawyers: Y SESHA SRINIVAS
• Assessee Lawyers: A V RAGHURAM
• Keywords: Business income; Cost of acquisition; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 504/HYD/2014 ASSESSMENT YEAR: 2009-10 M/S. SAVYASACHI CONSTRUCTIONS P. LTD., HYDERABAD [PAN: AAJCS4655H] VS THE INCOME TAX OFFICER, WARD-3(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RAGHU RAM, AR FOR REVENUE : SHRI Y. SESHA SRINIVAS, DR DATE OF HEARING : 04-09-2015 DATE OF PRONOUNCEMENT : 23-09-2015 O R D E R THIS APPEAL IS PREFERRED BY ASSESSEE AGAINST THE O RDER OF COMMISSIONER OF INCOME TAX (APPEALS)-IV, HYDERABAD DATED 10-01-2014 CONFIRMING PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT [ACT] LEVIED BY THE ASSESSING OFFICER (AO) VIDE ORDER DT. 17-05-201 2. ASSESSEE IS AGGRIEVED ON LEVYING PENALTY. 2. BRIEFLY STATED, ASSESSEE IS AN INVESTMENT COMPAN Y AND FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONS IDERATION ON 22-02- 2010 ADMITTING A LOSS OF RS. 10,90,691/-. ALONG WIT H THAT, ASSESSEE CLAIMED EXEMPTION OF DIVIDEND INCOME OF RS. 2,91,62 5/- U/S. 10(34) AND LONG TERM CAPITAL GAINS OF RS. 6,04,090/- U/S. 10(3 8). LOSS UNDER BUSINESS WAS CLAIMED TO BE CARRIED FORWARD. AO SEL ECTED THE CASE FOR I.T.A. NO. 504/HYD/2014 M/S. SAVYASACHI CONSTRUCTIONS P. LTD., :- 2 -: SCRUTINY AND IN THE SCRUTINY PROCEEDINGS, ASSESSEE FILED A REVISED COMPUTATION ON 10-10-2011 ADMITTING THE LONG TERM C APITAL GAINS CLAIMED AS SHORT TERM CAPITAL GAIN AND SETTING OF F TO THE BUSINESS LOSS CLAIMED. AO, NOT SATISFIED WITH THE ABOVE, FURTHER EXAMINED THE DETAILS OF COMPUTATION OF CAPITAL GAINS AND FOUND THAT ASSE SSEE HAS PURCHASED SHARES FROM JUNE 2007 ONWARDS (WRONGLY SHOWN AS JUN E, 2008 IN THE ASSESSMENT ORDER). IT WAS ALSO NOTICED THAT ASSESS EE IS HAVING TWO DEMAT ACCOUNTS AND 11,000 SHARES WERE SHOWN TO HAVE BEEN IN THE DEMAT ACCOUNTS MAINTAINED WITH M/S. NORTH EAST BROK ING SERVICES LTD. THESE WERE SOLD ON 02-05-2008 (AGAIN WRONGLY SHOWN AS 02-05-2011). ASSESSEE ALSO HAD ANOTHER DEMAT ACCOUNT IN WHICH 1, 000 SHARES WERE WITH M/S. NETWORTH STOCK BROKING LTD., AND THESE WE RE SOLD ON 10-07- 2008. SINCE SHARES WERE DEMAT-ED ON 20-03-2008 AND 25-01-2008, ASSESSEE ADOPTED THE MARKET PRICE AS ON THE DATE OF DEMAT AS COST OF ACQUISITION WHILE COMPUTING THE CAPITAL GAINS. AO NOTED THAT ASSESSEE- COMPANY ADOPTED COST OF THESE SHARES AS ON DATE OF DE-MATERIALIZATION FOR COMPUTING THE CAPITAL GAINS WHICH IS INCORRECT. SINCE ACTUAL COST HAS TO BE ADOPTED FOR COMPUTATION OF CAPITAL GAIN, IN T HE ABSENCE OF PROPER IDENTIFICATION DETAILS REGARDING THE EXACT PORTFOLI O NUMBERS OF SHARES WHICH WERE DE-MATERIALIZED ON 20-03-2008, COST PRIC E OF SHARES FIRST PURCHASED BY THE COMPANY (FIRST-IN-FIRST-OUT (FIFO) ) WAS ADOPTED FOR COMPUTING THE COST OF SHARES SOLD AND ACCORDINGLY, HE HAS ARRIVED AT THE COST OF PURCHASE AT RS. 14,50,808/- WHEREAS, THE SA LE PRICE BEING THE SAME, THE CAPITAL GAINS WERE RE-WORKED OUT TO RS. 3 1,68,275/-. HE ALSO GAVE A FINDING THAT SINCE THE ABOVE SHARES WERE NO T SOLD THROUGH A RECOGNIZED STOCK EXCHANGE AND WERE NOT SUBJECTED TO SECURITIES TRANSACTION TAX, SHORT TERM CAPITAL GAIN OF RS. 31, 68,275/- WAS PROPOSED TO BE BROUGHT TO TAX FOR WHICH ASSESSEES AR AGREED. THUS, AO COMPLETED THE ASSESSMENT BY RE-WORKING OUT THE CAPI TAL GAINS ON SALE OF INVESTMENTS AND ALLOWED IT TO BE SET OFF TO BUSINES S LOSS ADMITTED IN THE I.T.A. NO. 504/HYD/2014 M/S. SAVYASACHI CONSTRUCTIONS P. LTD., :- 3 -: RETURN OF INCOME, THEREBY DETERMINING THE TOTAL INC OME AT RS. 25,03,326/-. 2.1 SINCE ASSESSEE HAS ACCEPTED THE REVISED COMP UTATION OF CAPITAL GAINS, AO CONTINUED THE PENALTY PROCEEDINGS INITIAT ED IN THE ASSESSMENT ORDER FOR FURNISHING INACCURATE PARTICULARS OF ITS INCOME IN RESPECT OF CAPITAL GAINS ON SALE OF EQUITY SHARES. ASSESSEE V IDE LETTER DT. 13-02- 2012, EXPLAINED THAT THE SHARES WERE LISTED IN STOC K EXCHANGE, THEREFORE, ASSESSEE WAS UNDER THE IMPRESSION THAT C APITAL GAINS WERE EXEMPT U/S. 10(38) AND THIS WAS CLAIMED PURELY BY M ISTAKE. FURTHER, IT WAS SUBMITTED THAT CALCULATION OF CAPITAL GAINS WAS ON THE BASIS OF METHOD ADOPTED FIFO/LIFO, WHICH CAN ONLY BE A DIFFE RENCE OF OPINION. THE COMPANY ADOPTED LIFO METHOD WHERE AS AO ADOPTE D FIFO METHOD. IN ORDER TO CO-OPERATE WITH THE DEPARTMENT AND NOT TO HAVE CONTINUED/ PROTRACTED LITIGATION, ASSESSEE HAS ACCEPTED THE ME THOD ADOPTED BY THE AO AND PAID THE TAXES THEREON. IT WAS SUBMITTED TH AT THERE WAS NO WILLFUL OR MALAFIDE INTENTION BY ASSESSEE TO FURNIS H INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. 3. AO HOWEVER, DID NOT AGREE. HE WAS OF THE OPINIO N THAT DETERMINATION OF DATE OF TRANSFER, PERIOD OF HOLDIN G AND COST OF ACQUISITION IN RESPECT OF SECURITIES HELD IN DE-MAT ERIALIZED FORM WERE GOVERNED BY SECTION 45(2A) OF THE ACT AND CIRCULAR NO. 768 DT. 24-06- 1998 OF CBDT [232 ITR 5 (ST)]. BY EXTRACTING THE C IRCULAR IN PARA 6 OF THE ORDER AND RELYING ON THE APPLICATION OF FIFO ME THOD CONSIDERED TO BE MANDATORY FOR DETERMINATION OF PERIOD OF HOLDING AN D CONSEQUENTLY FOR DETERMINATION OF COST OF ACQUISITION, HE WAS OF THE OPINION THAT IT IS NOT OPEN FOR ASSESSEE TO CHOOSE BETWEEN FIFO AND LIFO M ETHODS. IT WAS FURTHER FELT THAT ASSESSEE HAS NOT EVEN ADOPTED LIF O METHOD IN ITS COMPUTATION AND THE PRICE ADOPTED WAS STATED TO BE AVERAGE PRICE OF I.T.A. NO. 504/HYD/2014 M/S. SAVYASACHI CONSTRUCTIONS P. LTD., :- 4 -: SCRIP AS ON DATE OF DE-MATERIALIZATION. AO HAS COME TO THE CONCLUSION THAT ASSESSEE BEING FURNISHED WRONG PARTICULARS OF ITS INCOME: I. WHEN IT CLAIMED IN THE RETURN OF INCOME THAT THE CA PITAL GAINS ARE LONG TERM; II. WHEN IT CLAIMED IN THE RETURN OF INCOME THAT THE CA PITAL GAINS ARE EXEMPT U/S. 10(38) OF THE ACT; AND FINALL Y III. WHEN THE CAPITAL GAINS WERE COMPUTED AT RS. 6,04,09 0/- AS AGAINST THE CORRECT CAPITAL GAINS OF RS. 31,68,275/ -. THEREFORE, HE HELD THAT ASSESSEE-COMPANY FURNISHED INACCURATE PARTICULARS OF ITS INCOME OF CAPITAL GAINS ON SALE OF SHARES FOR AY. 2009- 10 AND ACCORDINGLY, IMPOSED PENALTY OF RS. 9,79,000 /-. 4. BEFORE THE LD. CIT(A), ASSESSEE SUBMITTED THA T ASSESSEE WAS NOT AWARE OF THE PROVISIONS OF SECTION 45(2A) TO ADOPT FIFO AND ADMITTED THAT IT WAS AN INADVERTENT MISTAKE. ASSESSEE RELIE D ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PRICE WATERHOU SE COOPERS PVT. LTD., VS. CIT [348 ITR 306 (SC)], WHEREIN, THE HON' BLE SUPREME COURT HAS HELD THAT INADVERTENT MISTAKE CANNOT BE HELD TO BE CONCEALMENT AND SUBMITTED THAT WHILE THE DECISION OF THE SUPREME CO URT WAS RENDERED IN THE CASE OF A REPUTED CA FIRM, THE APPELLANT WAS A SMALL INVESTMENT- COMPANY THAT WAS NOT AWARE OF TAX PROVISIONS AND HA D COMMITTED UN- INTENTIONAL ERROR. 5. LD. CIT(A) HOWEVER, DID NOT AGREE WITH ASSESSEE S CONTENTIONS. LD. CIT(A) WAS OF THE OPINION THAT IT IS NOT A BONAFIDE AND INADVERTENT ERROR. IN ARRIVING AT THAT CONCLUSION, LD. CIT(A) OPINED T HAT THE APPELLANT CONCEALED THE FACT IN ITS RETURN THAT THE SHARES WE RE NOT SOLD THROUGH A I.T.A. NO. 504/HYD/2014 M/S. SAVYASACHI CONSTRUCTIONS P. LTD., :- 5 -: RECOGNIZED STOCK EXCHANGE. THE APPELLANT HAD FURTH ER CONCEALED THE FACT THAT THE CAPITAL GAINS WERE SHORT TERM IN NATU RE AND NOT LONG TERM. LASTLY, IT ADOPTED INCORRECT COST OF ACQUISITION OF THE SHARES. NONE OF THESE ACTIONS ARE CAPABLE OF OCCURRING THROUGH OVER SIGHT. OPINING THUS, LD. CIT(A) CONFIRMED THE PENALTY AND DISMISSED THE APPEAL. 6. ASSESSEE IS AGGRIEVED ON THE IMPUGNED ORDER OF T HE CIT(A) AND RAISED TWO GROUNDS HOLDING THAT THERE IS NEITHER CO NCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS AND CIT(A) ERRED IN CONFIRMING THE PENALTY. LD. COUNSEL REITERATED HIS ARGUMENTS BEFORE THE AUTHORITIES AND LD. DR RELIED ON THE ORDERS OF AO AND CIT(A). LD. COUNSEL ALSO PLACED ON RECORD COMPUTATION OF INCOME IN EARLIER Y EAR ALONG WITH ANNUAL REPORT OF THE YEAR IN PAPER BOOK. 7. I HAVE CONSIDERED THE RELEVANT PROVISIONS AND EXAMINED THE FACTS AVAILABLE ON RECORD. AS FAR AS LEVY OF PENALTY U/S . 271(1)(C) IS CONCERNED, IT HAS TWO COMPONENTS I.E., ASSESSEE SHOULD HAVE CO NCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. AS SEEN FROM THE ASSESSMENT ORDER AND ALSO THE PENALTY ORDER, AO INITIATED PENALTY PROCEEDINGS FOR FURNISHING INA CCURATE PARTICULARS OF SUCH INCOME. THEREFORE, IT IS NOT A CASE WHERE ASS ESSEE HAS CONCEALED PARTICULARS OF INCOME. 8. NOW, COMING TO THE ISSUE WHETHER ASSESSEE HAS FU RNISHED INACCURATE PARTICULARS OF INCOME, IT IS NECESSARY TO OBSERVE, WHAT CONSTITUTES FURNISHING OF INACCURATE PARTICULARS. HON'BLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS LIMITED [322 ITR 158] HAS HELD AS FOLLOWS:- (I) S. 271 (1) (C) APPLIES WHERE THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH I.T.A. NO. 504/HYD/2014 M/S. SAVYASACHI CONSTRUCTIONS P. LTD., :- 6 -: INCOME. THE PRESENT WAS NOT A CASE OF CONCEALMENT OF THE INCOME. AS REGARDS THE FURNISHING OF INACCURATE PARTICULARS , NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR IN ACCURATE. THE WORDS INACCURATE PARTICULARS MEAN THAT THE DETAIL S SUPPLIED IN THE RETURN ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS . IN THE ABSENCE OF A FINDING BY THE AO THAT ANY DET AILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND T O BE INCORRECT OR ERRONEOUS OR FALSE, THERE WOULD BE NO QUESTION OF I NVITING PENALTY U/S 271(1)(C). (II) THE ARGUMENT OF THE REVENUE THAT SUBMITTING A N INCORRECT CLAIM FOR EXPENDITURE WOULD AMOUNT TO GIVING INACCURATE P ARTICULARS OF SUCH INCOME IS NOT CORRECT. BY NO STRETCH OF IMAGI NATION CAN THE MAKING OF AN INCORRECT CLAIM IN LAW TANTAMOUNT TO F URNISHING INACCURATE PARTICULARS. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INC OME OF THE ASSESSEE . IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT AC CEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY U/S 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATU RE. 9. THUS, AS CAN BE SEEN, A MERE MAKING CLAIM BY WAY OF A WRONG METHOD FOR COMPUTATION OF CAPITAL GAINS, WHICH IS N OT SUSTAINABLE IN LAW BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCUR ATE PARTICULARS OF INCOME. KEEPING THE PRINCIPLES LAID DOWN BY THE HO N'BLE SUPREME COURT IN THE ABOVE SAID CASE, ONE HAS TO EXAMINE WHETHER, ASSESSEES CASE FALLS UNDER THE PRINCIPLES LAID DOWN THEREIN. 10. AS BRIEFLY STATED, ASSESSEE DID IN FACT PURCHAS ED SHARES FROM JUNE, 2007 ONWARDS. NOT ONLY THAT AS SEEN FROM THE EARLI ER YEAR COMPUTATION OF INCOME, ASSESSEE HAS PURCHASED SHARES AND SOLD T HEM AND OFFERED THEM AS BUSINESS INCOME TO AN EXTENT OF RS. 1,05, 82,041/-. COUPLED WITH OTHER INCOME FROM OPERATIONS, THE GROSS RECEIP TS WERE AT RS. 1.65 CRORES AND AFTER SETTING OFF THE EXPENDITURE, ASSES SEE OFFERED PROFIT BEFORE TAX AT RS. 63,53,085/-. AFTER CLAIMING DIVI DEND INCOME OF RS. 2,20,381/- AS EXEMPT, THE INCOME FROM BUSINESS WAS OFFERED AT I.T.A. NO. 504/HYD/2014 M/S. SAVYASACHI CONSTRUCTIONS P. LTD., :- 7 -: RS. 61,32,704/-. THEREFORE, ASSESSEE EVEN THOUGH I S HAVING NAME AS CONSTRUCTION PVT. LTD., IS AN INVESTMENT COMPANY AND PURCHASE AND SALE OF SHARES WAS SHOWN AS BUSINESS IN EARLIER YEA RS. AS SEEN FROM THE BALANCE SHEET IN THE IMPUGNED ASSESSMENT YEAR, ASSE SSEE HAD OPENING SHARES OF SAGAR CEMENTS LTD ALONE AT RS. 30,50,443/ - AND (WITH AN AGGREGATE MARKET VALUE OF RS. 12.71 CRORES) AND A F URTHER ACQUISITION OF SHARES TO AN EXTENT OF RS. 11,08,51,434/- (AT A MAR KET VALUE OF RS. 4,69,85,670/-). ASSESSEE HAS SOLD 12,000 SHARES DU RING THE YEAR AND CLAIMED LONG TERM CAPITAL GAIN UNDER THE STATED IMP RESSION THAT THE SHARES OF M/S. SAGAR CEMENTS LTD., WERE QUOTED IN S TOCK EXCHANGE. IT WAS CLAIMED THAT BY MISTAKE ASSESSEE DID NOT NOTICE THAT THE SHARES WERE NOT SOLD THROUGH STOCK EXCHANGE. BE THAT AS I T MAY, ASSESSEE FILED REVISED COMPUTATION ON 10-10-2011 I.E., ON THE VERY FIRST DATE OF HEARING OF THE SCRUTINY PROCEEDINGS. THE ASSESSMENT ORDER INDICATES THE DATE OF HEARING AS 10-10-2011, 31-10-2011 AND 11-11-2011. ASSESSMENT WAS COMPLETED ON 14-11-2011. THIS INDICATES THAT ON TH E VERY FIRST DATE OF HEARING, ASSESSEE HAS NOTICED THE MISTAKE IN ITS OW N COMPUTATION AND FILED REVISED COMPUTATION BEFORE THE AO. TO THAT E XTENT, EVEN THOUGH ASSESSEE MADE A WRONG CLAIM AT THE TIME OF FILING T HE RETURN, THE SAME WAS DEEMED TO HAVE BEEN RECTIFIED BEFORE THE AO NOT ICED IT. 11. NOW, THAT LEAVES WITH THE ISSUE OF COMPUTATI ON. AO IN THE ASSESSMENT ORDER NEITHER RELIED ON THE PROVISIONS O F SECTION 45(2A) NOR RELIED ON THE BOARD CIRCULAR, BUT EXAMINING THE DEM AT ACCOUNT NOTICED THAT SHARES WERE DE-MATERIALIZED ON 20 - 03-2008). HE ALSO NOTICED THAT ASSESSEE WAS BUYING SHARES FROM NSC AND BSC FROM 08 -06-2007 ONWARDS. THEREFORE, HE HAS ONLY PROPOSED TO ASSESS EES AR THAT ACTUAL STOCK COST HAS TO BE ADOPTED, FOR WHICH AR HAS NO O BJECTION. EVEN THOUGH AO NOTICED THAT ASSESSEE DID NOT FOLLOW FIFO METHOD, THE I.T.A. NO. 504/HYD/2014 M/S. SAVYASACHI CONSTRUCTIONS P. LTD., :- 8 -: INVOCATION OF SECTION 45(2A) AND BOARD CIRCULAR AS STATED IN THE PENALTY ORDER, IS NOT AT THE TIME OF ASSESSMENT ITSELF. 12. EVEN IF AO, BEING THE SAME OFFICER, HAS CONSIDE RED SECTION 45(2A) AND CIRCULAR 768 FOR THE PURPOSE OF ADOPTING A METH OD, ONE HAS TO EXAMINE WHETHER THAT WILL APPLY TO THE SHARES WHICH ARE PURCHASED IN PHYSICAL FORM EARLIER. AS FAR AS STOCK OF ACQUISIT ION OF PHYSICAL SHARES IS CONCERNED, IN VIEW OF THE CLEAR IDENTITY OF THE SHA RE NUMBERS THE SHARES CAN BE IDENTIFIED AND DATE OF PURCHASE CAN BE IDENT IFIED WITH THE SHARES WHICH ARE SUBMITTED FOR TRANSFER. THEREFORE, IN TH E PHYSICAL FORMAT, WHETHER IT IS FIFO OR LIFO, METHOD IS NOT A CRITERI A AS THE PHYSICAL SHARES WHICH WERE SOLD CAN BE IDENTIFIED AND THE CO ST OF THOSE ASSETS COULD BE ASCERTAINED. HOWEVER, IN THE DEMAT FORMAT SINCE SHARES ARE NOT IDENTIFIABLE WITH NUMBERS, THE PROVISIONS OF SECTIO N 45(2A) AND BOARD CIRCULAR NO. 768 EXPLAINS THE COST OF ACQUISITION, DETERMINATION OF PERIOD OF HOLDING UNDER THE FIFO METHOD. 13. EVEN THOUGH AO RELIED ON THE SAID PROVISION, TH E FACT AS COMING OUT OF THE ORDERS OF THE AO AND CIT(A) WAS THAT ASS ESSEE HAS ONLY 12,000 SHARES DE-MATERIALIZED ON 20-03-2008 AND 25-01-2008 . AS PER THE DETAILS MENTIONED IN THE ASSESSMENT ORDER, ENTIRE SHARE HOLDING IN THE DEMAT ACCOUNT WAS SOLD. THE SHARES OF 11,000 WERE SOLD ON 02-05-2008 AND 1,000SHARES DE-MATERIALIZED ON 25-01-2008 WERE SOLD ON 10-07- 2008. SINCE THE ENTIRE BLOCK OF SHARES AS AVAILABL E IN THE DEMAT ACCOUNT WERE SOLD, QUESTION OF INVOKING SECTION 45(2A) PROV ISIONS DOES NOT ARISE. FOR THE SAKE OF CLARITY, PROVISIONS OF SECTION 45(2 A) ARE EXTRACTED AS UNDER: SEC. 45(2A) WHERE ANY PERSON HAS HAD AT ANY TIME D URING PREVIOUS YEAR ANY BENEFICIAL INTEREST IN ANY SECURITIES, THEN, AN Y PROFITS OR GAINS ARISING FROM TRANSFER MADE BY THE DEPOSITORY OR PARTICIPANT OF S UCH BENEFICIAL INTEREST IN RESPECT OF SECURITIES SHALL BE CHARGEABLE TO INCOME -TAX AS THE INCOME OF THE I.T.A. NO. 504/HYD/2014 M/S. SAVYASACHI CONSTRUCTIONS P. LTD., :- 9 -: BENEFICIAL OWNER OF THE PREVIOUS YEAR IN WHICH SUCH TRANSFER TOOK PLACE AND SHALL NOT BE REGARDED AS INCOME OF THE DEPOSITORY WHO IS DEEMED TO BE THE REGISTERED OWNER OF SECURITIES BY VIRTUE OF SUB-SECTION (1) OF SECTION 10 OF THE DEPOSITORIES ACT, 1996, AND FOR THE PURPOSES OF (I) SECTION 48 ; AND (II) PROVISO TO CLAUSE (42A) OF SECTION 2, THE COST OF ACQUISITION AND THE PERIOD OF HOLDING O F ANY SECURITIES SHALL BE DETERMINED ON THE BASIS OF THE FIRST-IN-FIRST-OUT M ETHOD. EXPLANATION.FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESSIONS 'BENEFICIAL OWNER', 'DEPOSITORY' AND 'SECURITY' SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN CLAUSES (A), (E) AND (L) OF SUB -SECTION (1) OF SECTION 2 OF THE DEPOSITORIES ACT, 1996.] 14. THESE PROVISIONS WILL APPLY ONLY WHEN ASSESSEE IS TRANSACTING REPEATEDLY IN THE SHARES DEMATERIALIZED. ONLY IN T HE EVENT OF DEMATERIALIZING ALL SHARES AND SALE IN PIECE MEAL M ETHOD, THERE IS NECESSITY OF ADOPTING FIFO METHOD. IN THIS CASE, TH ERE IS ONLY ONCE SHARES HELD IN PHYSICAL FORMAT WERE DEMATERIALIZED AND THOSE WERE SOLD ENBLOCK. IN BOTH DEMAT ACCOUNTS 11,000 AND 1,000 SH ARES WERE DEMATERIALIZED AND SOLD ALL OF THEM. SO, AS FAR AS FIFO METHOD OF ADOPTION ON THE BASIS OF BOARD CIRCULAR IS CONCERNE D, THIS DOES NOT APPLY TO THE SINGLE TRANSFER OF SHARES ENBLOCK. IF ASSES SEE HAS DE-MATERIALIZED ALL THE SHARES WHICH IT WAS HOLDING (3,30,885 AS PE R BALANCE SHEET AS ON 31-03-2009) THEN, IF ASSESSEE WAS SELLING THE SHARE S IN VARIOUS PHASES OR TRANCHES, THEN ADOPTION OF FIFO METHOD WOULD BECOME MANDATORY. IN FACT BOARD CIRCULAR VIDE PARA 5A HAS THIS CLARIFICA TION. FIFO METHOD WILL BE APPLIED ONLY IN RESPECT OF THE DEMATERIALIZED HOLDINGS BECAUSE IN CASE OF SALE OF DEMATERIALIZED SECURITIES, THE SECURITIES HELD IN PHYSICAL FORM CA NNOT BE CONSTRUED TO HAVE BEEN SOLD AS THEY CONTINUE TO REMAIN IN POS SESSION OF THE INVESTOR AND ARE IDENTIFIED SEPARATELY. I.T.A. NO. 504/HYD/2014 M/S. SAVYASACHI CONSTRUCTIONS P. LTD., :- 10 - : 15. THUS, AOS RELIANCE ON MANDATORY PROVISIONS OF SECTION 45(2A) DOES NOT APPLY TO THE FACTS OF THIS CASE. WHAT ASS ESSEE SEEMS TO HAVE ADOPTED AS STATED BY THE AO IN THE ASSESSMENT ORDER /PENALTY ORDER ITSELF, THAT ASSESSEE HAS ADOPTED AVERAGE PRICE OF SCRIP AS ON THE DATE OF DE-MATERIALIZATION. SINCE ASSESSEE HAS MORE NUMBER OF SHARES THAN SOLD THAT TOO IN PHYSICAL FORMAT, IT COULD HAVE ADOPTED AVERAGE COST METHOD. THIS IS ONE WAY OF ARRIVING AT THE AVERAGE COST OF SHARES SOLD. THERE IS NO DISPUTE BY THE AO THAT THE PRICE ADOPTED BY ASSESSE E AS COST OF ACQUISITION IS AVERAGE PRICE OF SHARES IT HELD ON T HE DATE OF DE- MATERIALIZATION. THIS COULD BE AN INCORRECT METHOD OF ARRIVING AT THE COST OF ACQUISITION WHERE AS, AO ON EXAMINATION OF THE P URCHASE OF SHARES AS LISTED OUT BY HIM ADOPTED THE ACTUAL COST. WE ARE NOT INFORMED HOW AO COULD STATE THAT ASSESSEE STARTED PURCHASING IN JUN E EARLIER YEAR AND THOSE ONLY SENT FOR DEMATERIALIZATION. ANY SHARE IT WAS HOLDING ON THE DATE OF DEMAT COULD HAVE BEEN SENT (OUT OF MORE THA N THREE LAKH SHARES IT WAS HOLDING) FOR DEMAT, NOT NECESSARILY IN THE O RDER OF PURCHASE. THEREFORE, THERE IS NO SANCTITY EVEN TO THE METHOD ADOPTED BY AO. ASSESSEE ACCEPTED THE METHOD IN ORDER TO SETTLE THE ISSUE AND WAS NOT INTERESTED IN PURSUING LITIGATION. THEREFORE THIS C AN BE CONSIDERED AS INADVERTENT MISTAKE COMMITTED. THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPE RS PVT. LTD., VS. CIT [348 ITR 306 (SC)] (SUPRA) CERTAINLY APPLIES TO THE FACTS OF THE CASE. SINCE AO HAS RE-COMPUTED THE COMPUTATION BY FOLLOWI NG FIFO METHOD AS AGAINST THE AVERAGE COST PRICE METHOD ADOPTED BY AS SESSEE, IT CANNOT BE STATED THAT ASSESSEE IS GUILTY OF FURNISHING INACCU RATE PARTICULARS. MERE MAKING OF A CLAIM BY WAY OF WRONG METHOD OF COMPUTA TION BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME AND SAID METHOD CLAIMED IN THE RETURN OF INCOME CANNOT AMOUN T TO FURNISHING INACCURATE PARTICULARS OF INCOME. AS ALREADY STATE D, ASSESSEE HAD ADMITTED THE MISTAKE IT COMMITTED IN CLAIMING EXEMP TION, BY FILING I.T.A. NO. 504/HYD/2014 M/S. SAVYASACHI CONSTRUCTIONS P. LTD., :- 11 - : REVISED COMPUTATION AND SETTING OFF TO BUSINESS LOS S, ON THE VERY FIRST DATE OF HEARING ITSELF BEFORE THE SAME WAS NOTICED BY THE AO. THEREFORE, I AM OF THE OPINION THAT ASSESSEE HAS NEITHER FURNISH ED INACCURATE PARTICULARS NOR CONCEALED INCOME. IN FACT IT IS NO T THE CASE OF REVENUE THAT ASSESSEE HAS CONCEALED ANY INCOME. THEREFORE, CONSIDERING THE FACTS OF THE CASE AND PRINCIPLES OF LAW ON THE ISSUE, I A M SATISFIED THAT THIS IS NOT A FIT CASE FOR LEVYING PENALTY. ACCORDINGLY, T HE SAME IS CANCELLED. 16. IN THE RESULT, ASSESSEE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2015 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 23 RD SEPTEMBER, 2015 TNMM COPY TO : 1. M/S. SAVYASACHI CONSTRUCTIONS P. LTD., 8-3-833/2 75, KAMALAPURI COLONY, HYDERABAD. C/O. K. VASANTKUMAR & A.V. RAGHU RAM, ADVOCATES, 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-3(1), HYDERABAD. 3. CIT(APPEALS)-IV, HYDERABAD. 4. CIT-III, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.